The wrong key performance indicator can drive the wrong behaviour
A global player in the mining industry asked for advice on their plans to introduce a new variable compensation system for employees that relates to safety performance.
The previous bonus system was only connected to their Lost Time Injuries (LTI) performance. That kind of system has two potential drawbacks for companies that do not yet have a mature safety performance. First, when a bonus system is entirely based on LTI or other lagging indicators, it can discourage reporting and/or make people come to work when they should stay at home. The second problem with basing rewards on LTIs is that it often does not result in any action, simply because people fail to see how this translates into daily action.
The mining company realised it needed to use a balanced mix of leading and lagging indicators. The new draft system that I was able to review included a combination of both. The main lagging indicator for the company was still LTI, and zero LTIs were the condition ‘sine qua non’ for employees to be eligible for the bonus system.
The bonus amount, though, would depend on several leading indicators, such as:
- 5S performance
- Execution of safety action plans
- Organisation of safety briefings
- Reporting of near misses
- Execution of safety audits